For use only with Duncan texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Segmenting and Targeting

 Why are companies moving away from mass marketing?  Why is segmenting important?  How can companies identify different segments?  How does targeting work? Chapter Outline

Chapter Perspective Targeting “everyone” is: Expensive Wasteful Nearly impossible A more sensible approach: Identify smaller segments who are most likely to consider your brand (segmentation) and target them with specifically designed MC messages Teenagers

Opening Case: The Barina

Reposition the car as “cool” in key segment An IMC campaign featuring: Target audience of early 20s females characterized as “early adopters “BG”—Barina Girl animated character & logo Multiple media including TV, radio Unique media like a comic strip and festivals An IMC campaign featuring: Target audience of early 20s females characterized as “early adopters “BG”—Barina Girl animated character & logo Multiple media including TV, radio Unique media like a comic strip and festivals 97% in the target liked the campaignliked 30% sales increase 97% in the target liked the campaignliked 30% sales increase Opening Case: The Barina Challenge: Answer: Results: Reposition the car as “cool” in key segment An IMC campaign featuring: Target audience of early 20s females characterized as “early adopters” “BG”—Barina Girl animated character & logo Multiple media including TV, radio Unique media like a comic strip and festivals An IMC campaign featuring: Target audience of early 20s females characterized as “early adopters” “BG”—Barina Girl animated character & logo Multiple media including TV, radio Unique media like a comic strip and festivals

Why Are Companies Moving Away From Mass Marketing? Mass marketing: An attempt to sell the same thing to a wide range of customers Segmenting: Grouping customers or prospects according to common characteristics

Tales From the Real World Clients often say “we have to target everyone” Unless they’re Wal-Mart, that’s not true. It’s time to dig deeper into the behavior of their consumers. Chances are, segmentation will save them money—and focus their message on their best customers…

Coricidin Targets a Niche Segment + +

Mass Customization Mass customization: A manufacturing process that is programmed to choose ingredients/parts to produce custom designed goods

Costs Less to Sell to Existing Customers Some Customers Are More Profitable Costs Less to Sell to Existing Customers Segmenting Has 3 Key Benefits Key Benefits Knowing Who’s in Your Segment Can Lead You to Others in the Same Group

Figure 7-2: The 7 Steps of Segmenting

IMC In Action: Midas

Conduct research into customer service expectations and satisfaction Identify and target the best customer segments Midas now targets two equal segments Car lovers with a “good maintenance” message Utilitarians with a “no nonsense” message Midas now targets two equal segments Car lovers with a “good maintenance” message Utilitarians with a “no nonsense” message IMC In Action: Midas Challenge: Answer: Results: Conduct research into customer service expectations and satisfaction Identify and target the best customer segments

Figure 7-3: The 4 Key Segmentation Variables

L.L. Bean Uses Psychographic Segmentation + +

Dinkies: Double income no kids Biddies: Baby boomer in debt Skippies: Schoolkids with income and purchasing power Guppies: Gay upwardly mobile professionals Maffies: Middle-aged affluent folks Mossies: Middle-aged, overstressed, semi-affluent suburbanties Dimps: Duel-income with money problems Woopies: Well-off older persons

Geo-Demographic

Relationship segments No Loyalty Inertia Loyalty (Repeat purchases out of habit) Latent Loyalty (Feels strong attachment but makes few purchases) Premium Loyalty (Strong attachment and frequent purchases)

Innovators 2.5% Early Adopters 13.5% Early Majority 34% Late Majority 34% Laggards 16% Late Majority 34% Early Majority 34% Early Adopters 13.5% Innovators 2.5% The 5 Product Adopter Categories Product Adopters

How Does Targeting Work? Targeting: The process used to identify which segments MC messages should be designed to reach and to determine how much MC spending should be used to reach each segment

Profitable Targeting Measurable Accessible Substantial Differential Actionable

Focus only on those with best profit potential Profitability Targeting The smaller the segment, the more the message can target and speak to that group Message Targeting Focus only on those with best profit potential Profitability Targeting The smaller the segment, the more the message can target and speak to that group Message Targeting Types of Targeting B2B Targeting NAICS codes are very helpful

Insight: Activity-Based Costing Some firms go even further than simple profitability targeting and track all costs associated with each customer’s every contact with the firm—even the organization’s cost for the time a customer service rep spends on a phone call from the customer

Final Note: Segmenting and targeting calls for a careful balancing of two objectives: Acquisition (attracting new customers) Retention (keeping current customers happy)

 Segmentation and Targeting?  List and Describe Steps in Segmentation Process…  Why Start with Current Customers when Segmenting?  Five Types of Customer Segmentation? Examples…  Contents of Closet or Medicine Cabinet…Brand Targeting…Why It Works, Why It Speaks to You Personally… Questions - 7